Gwynne Dyer: The economic power shift and decline of the West

You know the story-line by now. There are one million U.S.-dollar millionaires in China. (“To get rich is glorious,” said former leader Deng Xiao-ping.) Seventy percent of the homes in China are bought for cash. China’s total trade—the sum of imports and exports—is now bigger than that of the United States. “They’re going to eat our lunch,” whimper the faint-hearted in the West.

It’s not just the Chinese who are coming. The Indians and the Brazilians are coming too, with economic growth rates far higher than in the old industrialized countries, but it doesn’t even stop there. There’s also Mexico, Turkey, Indonesia, and half a dozen other big countries in what used to be called the Third World that have discovered the secret of high-speed growth. The power shift is happening even faster than the pundits predicted.

As recently as 2009, the “Brics” (Brazil, Russia, India, and China) accounted for less than one-tenth of total global consumption. The European Union consumed twice as much, and so did the United States. But by 2020, the Brics will be producing and consuming just as much as either of the older economic zones, and by 2025 considerably more than either of them.

In fact, if you include not just the four Brics but all the other fast-growing economies of the ex-Third World, in just a dozen years’ time they will account for around 40 percent of world consumption. As a rule, with wealth comes power, so they will increasingly be calling the tune that the West must dance to. Or at least that is the Doomsday scenario that haunts the strategists and economists of the West. It’s nonsense, for at least three reasons.

First of all, a shift in the world’s centre of economic gravity does not necessarily spell doom for those whose relative influence has dwindled. The last time the centre shifted, when the United States overtook the nations of Europe in the late 19th and early 20th centuries, it did not dent Europe’s prosperity at all.

It’s true that by the latter half of the 20th century there were American troops all over Western Europe, but that would not have happened if Europe had not come close to destroying itself in the two world wars (which can be seen as a European civil war in two parts). In any case, the U.S. troops have mostly gone home now, and Europeans live at least as well as Americans.

Secondly, the new centre of gravity this time, while mostly located in Asia, is not a single country with a coherent foreign policy like the United States. The four Brics will never become a strategic or economic bloc. They are more likely to split into rival blocs, although one hopes not. And the Mexicos and Turkeys and Indonesias of this new world will have their own fish to fry.

So it will be a more complicated world with many major players, and the centre of economic gravity will be in Asia, but there’s nothing particularly strange about this. More than half of the human race lives in Asia, so where else should the centre of gravity be? Asia is very far from monolithic, and there is no logical reason to suppose that its economic rise spells economic decline for the West.

Thirdly, descriptions of the future that are simply extrapolations of the present, like the ones at the start of this article, are almost always wrong. If the widely believed forecasts of the 1980s had been right, Japan would now bestride the world like an economic Colossus. The one certain thing about the future is surprises—but some surprises are a little less surprising than others.

Take climate change, for example. The scientific evidence strongly suggests that the tropical and subtropical parts of the world, home to almost all of the emerging economic powers, will be much harder hit by global warming than the temperate parts of the globe, farther away from the equator, where the older industrialized countries all live.

There is already much anger about this in the new economic powers. Eighty percent of the greenhouse gases of human origin in the atmosphere were put there by the old-rich countries, who got rich by burning fossil fuels for the past two centuries, and yet they get off lightly while the (relatively) innocent suffer. But even if the newly rich wanted revenge, they are too disunited—and will be too busy coping with the warming—to do much about it.

The centre of gravity of the world economy is undoubtedly leaving the old “Atlantic” world of Europe and North America and moving towards Asia, but how far and how fast this process goes remains to be seen. And there is no reason to believe that it will leave the countries of the West poor or helpless.

True, economists in the West often ask the question: “What will we sell the emerging countries in the future that they cannot produce for themselves?” In the runaway global-warming scenario, the answer would be “food”, but the real answer is sure to be more complex than that. Never mind. They’ll think of something, because they’ll have to.

17 Comments

Gilbert Marks

Feb 19, 2013 at 11:19am

In the west we have decided to power our economies on politically correct 40 cents a kwh and solar at 90 cents (inefficient gas backup and transmission included) while at the same time putting out as many GHG's as efficiently burning gas alone.

The Bric countries are now paying 6 cents a kwh to import coal while building new nuclear as fast as possible at 3 cents a kwh today and dropping to 1 cent a kwh in the new future. Nuclear is too politically incorrect and Big Oil subsidized gas too cheap to be considered in the West.

China can build a 30 story apartment building in two weeks at a tiny fraction of the cost of our buildings that years to build. They are covering their country with thousands on thousands of miles of high speed rail eventually capable of supersonic speeds while can't even fund transit.

It's hard to see a future for the West in our society owned by Big Oil and Wall Street and run by corrupt attorneys, when competing with the Chinese leadership run by pragmatic engineers.

mike antler

Feb 19, 2013 at 3:05pm

Well, one cannot feel sorry for us in this issue.It was American companies who chose to move their business ventures to those countries due to cheaper labour and other reasons.Doing this gave those countries a great boost,. as other countries followed the USA's lead, and in turn caused an upword push to those economies.Then when the USA ran up large deficits due to wars, and looked for money to help them pay for them, those countries supplied the capital needed.Factor in the "Greed" factor of Wall Street, and the large economic blow it administered to G8 countries, it is our own fault.Now the US, Canada, and European counties are in free fall, no matter what those governments try to do to bring them back to the position of glory they once held.It is too bad that our children will have to suffer because of the stance we have taken.

Canada...

Trevor

Feb 19, 2013 at 5:38pm

@Gilbert. The world's leading producer, installer and consumer of both wind and solar power is China. Neither do solar and wind cost anything like what you quote, even including transmission and backup systems.

I find it astounding that people still make public fools of themselves on basic facts in the age of Google, but - quod erat demonstratum.

Kaos Agent

Feb 19, 2013 at 5:40pm

It will be all about the primary resources: energy, minerals, wood, food. Who owns them, whether they are or are not sustainably managed, how equitable the process will be, and above all whether we will avoid 'the tragedy of the commons' on a global scale. In a changed climate. Tough sledding. Oh well, at least the birth rate is slowing down.

gilbert marks

Feb 19, 2013 at 6:45pm

@trevor

China is selling lots of wind and solar to suckers in the west. It has almost none grid (2% wind, 0% solar) connected nor are they likely to with wind costing many times hydro and nuclear. These are the facts if you can get somebody who can use the internet.

Here's the real cost of solar from the innernet so you can start your learning process.

A 17 MW peak solar install in service Jan 2011 by expert engineers at Duke Energy using real solar panels made in the USA not the Walmart quality Chinese junk with the same service life as everything else you buy at Walmart.

quod erat hypus maximus

RobertB

Feb 20, 2013 at 5:50am

such nonsense. china is nothing without usa consumers buying their crap. when usa consumers stop buying crap chinese products the country will collapse in a week. China is nothing without consumerism in the west

PJ

Feb 20, 2013 at 9:59am

Right on Robert B ,we brought most of this on ourselvs when we wanted cheaper prices on all goods.Manufacturers had to close their doors and become importers,we are not alone though,most other countries did the same enabeling places like the Bricks to profit,from our consumption.Now as per global warming gases,these same countries are now producing these at a higher rate the west ever did ,and passed us a long time ago.Canada at 2.5% and US at 27%.Now who should cut back?.The greens dont want nuclear,gas,coal,to produce power.We shuld go back to living in caves and freezing,(no its global warming) so we wont need heating,YA.We are so possesd by these doom sayers that we spending, BILLIONS on alternative energy that wont cut it without filling in with conventional energy,and even that product is comming in from China.Now whos laughing all the way to the bank.By the way Gilbert China is communist thats wy they get things done.

petr aardvark

Feb 21, 2013 at 10:07am

There is is still very little innovation going on in China. Yes they churn out more engineers per year than the US however, much of Chinese manufacturing is simply low skill assembly such as manufacturing electronic devices that are designed in the west. The recent industrial hacking is an indicator that they (like Japan) are adept at copying technology.

They may be able to build a 30 story building in weeks, but there are huge issues with corruption (lead in toys, melamine in milk, plastic etc in pet food)., heavy air pollution (due to most people using coal to heat their homes), and massive building bubble - google China's ghost cities and you will get an idea of a huge building boom condo towers and shopping centres that are mostly empty. Combine this with the effect of the one-child policy and an aging population means they are heading for trouble.